International Taxes

Italy Modifies Huge Business Aviation Tax

After advocacy efforts from NBAA, the European Business Aviation Association (EBAA) and the Italian Business Aviation Association (IBAA), Italy has modified its potentially destructive tax on business and charter aircraft, extending the number of consecutive days aircraft of foreign registry are allowed to stay in the country before facing onerous tax levies.

Amended at the last minute, the tax originally applied to all aircraft, regardless of their registry, that remained on Italian soil for more than 48 consecutive hours. NBAA representatives met with officials at the Italian embassy in Washington, DC, while European business aviation advocates reached out to Italian lawmakers in Rome and explained that the tax would significantly reduce business aircraft activity and harm numerous Italian businesses. Thanks to these and other efforts parliamentarians extended to 45 consecutive days the length of time operators from other countries could park their aircraft at Italian airports without having to fear being subject to the tax.

“During debate on the original tax plan, someone came up wrongly with the idea that you could catch Italian owners trying to register their aircraft outside Italy with the 48-hour rule,” said IBAA board member and aviation attorney Franco Campomori. “They didn’t appreciate that, by doing that, they would catch foreign aircraft coming into Italy. It was a technical mistake.”

Had that mistake not been corrected, owners and operators of foreign aircraft parked at Italian airfields for more than two straight days would have paid dearly. The highest taxes would have been paid by owners of the heaviest aircraft – more than €300,000 (approximately $400,000) a year.

In amending the tax, Italian lawmakers also reduced the rate on lighter aircraft, with maximum takeoff weights that do not exceed six metric tons (13,228 pounds).

The Italian government also exempted foreign aircraft undergoing maintenance in Italy, regardless of the length of time they remain in country, Campomori said.

Details on implementation of the new tax, as well as procedures for assessment and payment, are expected to be released by tax authorities in late June.

While the change in rules regarding foreign aircraft visiting Italy were welcomed by aircraft operators worldwide, Campomori warned of yet another tax enacted by the Italian parliament as part of an effort to reduce debt. This new “aero-taxi” tax would apply to air passengers in Italy, although Campomori said the broad wording of the new measure is hard to understand, since the tax will only apply to passengers on commercial aircraft, or could also be extended to cover passengers on non-commercial flights.

“It links a per-passenger fee to the length of the flight,” said Campomori. “We will need to see the tax authorities implementing directives for clarification.”

Under the current legislation, the aero taxi tax is set at €100 ($131) per passenger on flights of less than 1,500 kilometers (810 nautical miles) and €200 ($262) per passenger on flights of more than 1,500 kilometers. “If it’s enacted on departing flights only, it will bring the Italian government almost €30 million a year. It could be doubled, though, if it includes arriving flights as well as departing flights,” explained Campomori.

Predictably, perhaps, there is much grumbling among Italian business aircraft operators.

“There is growing discontent among Italian operators. Some people – IBAA among them – are considering the possibility of challenging that specific provision as being unconstitutional. It is discriminatory according to EU legislation,” Campomori said.

Even if the “aero-taxi” levy is modified or defeated, Campomori warned the government’s voracious appetite for tax revenue in his country is making operators both at home and abroad very nervous.

“Operators and aircraft owners don’t like this kind of roller coaster,” he explained. “All this uncertainty about taxes appearing and disappearing has Italian owners looking toward jurisdictions where the tax and legal atmospheres are friendlier to aviation.”